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2019 (11) TMI 596 - AT - Income TaxIncome surrendered in the return of income filed u/s.153A - survey u/s.133A - bogus purchases - statement of the assessee made u/s 132(4) - HELD THAT:- Assessee cannot run away from his statement of recording bogus purchase bills, but can prove legally that the entire amount of bills should not be legally added. Therefore, the contention of the DR that once the assessee had admitted in his statement u/s 132(4) to the effect that there was no proper evidence of the genuineness of the bills of purchase of steel and offered the equal amount for taxation, then he cannot take a contrary stand in the assessment proceedings, is countenanced only to the extent of non-genuineness of the bills of purchase of steel but not to the extent of offering equal amount for taxation, which would be separately examined as per the provisions of law. DR has raised one more preliminary issue to the effect that income once included by the assessee in his return of income binds him and hence the assessee cannot claim for its exclusion. This contention has no legal legs to stand on and is liable to be rejected - even if the assessee wrongly includes certain income in his return, which is otherwise not chargeable to tax, he has a right to lodge a claim before the AO in this regard during the course of assessment proceedings. As the assessee in the instant case has challenged the suo motu inclusion of such an income before the AO, we do not find any fetters on the powers of the AO in not examining if the same is actually liable to be fully or partly included in the total income. The contention raised by the DR in this regard is, therefore, jettisoned. Coming to the merits of the case, it is seen that the assessee recorded the alleged tainted purchases of steel amounting to ₹ 99,41,075/- in his books of account for the year under consideration. The assessee is engaged in the business of manufacture of sugar machinery. Steel is a raw material for the manufacturing of the machinery. It is obvious that without raw material there cannot be any finished products. The assessee has filed stock details before the authorities which show that purchases for the disputed quantity were, in fact, made. The fact that the assessee made genuine sales, has not been disputed by the Revenue. In such a scenario, even if we accept the contention of the Revenue that the purchases were bogus, still the entire amount of purchases cannot be added in view of the fact that some purchases must have, in fact, been made which got eventually consumed in the process of manufacturing. This evidences that the assessee made some cheaper purchases of steel, but obtained bogus purchase bills of higher value so as to inflate the expenses and reduce the profit. In such circumstances, only the profit (excessive cost element) embedded in such bogus purchases can be included in the total income of the assessee, which, in the peculiar facts and circumstances of the instant case, is estimated at 10% of the bill amounts. Our view in estimating the net profit rate @10% of bogus purchases is fortified by the judgment of the hon’ble jurisdictional High Court in Pr. CIT Vs. Paramshakti Distributors Pvt. Ltd. [2019 (7) TMI 838 - BOMBAY HIGH COURT] in which addition at the rate of 10% of bogus purchases has been held to be sustainable in similar circumstances. To sum up, the assessee gets relief by means of deletion of addition of 90% - Decided partly in favour of assessee.
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